Sentiment Indicators Heading In Different Directions

Every weekend, one of my routines is to check the different sentiment indicators that I like the best.

I always check the CBOE Equity Put/Call Ratio, the Rydex Nova/Ursa Ratio and the Investors Intelligence report. Sometimes I will look at more than these three, but these three are a must for me.

Two weeks ago, I mentioned the CBOE Equity Put/Call ratio had been falling, which means that option investors were becoming more optimistic. The 21-day moving average on the ratio was at 61.5 back then and not much has changed since then. It is still hovering right in the 0.60 range.

As I mentioned two weeks ago, too much optimism is a caution sign for a contrarian. Thus, the low put/call ratio is a caution signal.

Turning to the Rydex Nova/Ursa ratio, a low reading on this indicator means that more money is flowing into the bearish Ursa fund and suggests that investors are pessimistic.

At the very least, a falling ratio means that investors are being cautious.

Last week, the Nova/Ursa ratio dropped sharply from a reading of 0.347 to a reading of 0.292. The last time this ratio was this low was in mid-October, just before the market rallied sharply.

The Investors Intelligence report has been extremely stable lately with the bullish percentage holding within 1 percent of 50 percent for the last six weeks while the bearish percentage has held within a point and half of 30 percent for the same period.